Government saves over £1 billion on procurement

This news article was published under
the 2010 to 2015 Conservative and Liberal Democrat coalition government

The government is making significant changes to the way it buys common goods and services, expected to save £3bn a year.

In a move expected to save £3 billion a year, Francis Maude today announced that the government is making significant changes to the way it buys in categories of common goods and services such as stationery and office services.

Francis Maude today also reinforced the government’s commitment to buy more of its products and services from smaller suppliers.

Small and medium enterprise (SME) action plans published today set out how each government department will seek to achieve the government’s overall aspiration to do 25% of its business with small and medium sized enterprises (SMEs).

The plans include the creation of one central team, Government Procurement, which will contract for widely used goods and services for the whole of government at a single, better price, ending the signing of expensive deals by individual departments. The move will end poor value contracts such as those where government departments and agencies paid between £350 and £2,000 for the similiar IT needs.

Central procurement of common items is expected to save more than £3 billion a year by 2015 – 25% of the government’s current annual spending on these items, helping departments to meet tighter budgets set in the Spending Review.

The announcement comes on the day that Francis Maude announced that the government was on track to have saved more than £1 billion from tighter spending on discretionary goods and services including consultants and agency staff in the last year.

Changes to make government contracts more accessible to SMEs have already led to one not-for-profit SME successfully undercutting larger competitors and winning a £1.6 million contract to provide office support services to HM Revenue and Customs.

Francis Maude said:

It is bonkers for different parts of government to be paying vastly different prices for exactly the same goods. We are putting a stop to this madness which has been presided over for too long. Until recently, there wasn’t even any proper central data on procurement spending.

So, as Sir Philip Green found, major efficiencies are to be found in government buying. The establishment of Government Procurement means that the days when there was no strategy and no coherence to the way the government bought goods and services are well and truly at an end.

In the last year, we have already made significant changes to drive down procurement spend by £1 billion, but this new centralised service means we will continue to deliver savings which are expected reach more than £3 billion a year.

We are also determined to press ahead with measures to create a more level playing field so that small organisations and businesses can compete fairly with bigger companies for government contracts. SMEs can provide better value and more innovative solutions for government and the actions set out today will support their growth as the economy starts to recover.

SME commitments made today include:

greater use of the ‘open’ procurement procedure - which has already increased by 12% across the public sector between March and April alone - ensuring all suitable suppliers have their tender proposals considered

following the Innovation Launch Pad, 5 further Dragons’ Den style ‘Product Surgeries’ are planned so that SMEs are increasingly able to pitch their innovative proposals directly to government

Moves to address the different prices paid by departments have already been taken by government. Tenders to supply government travel and office supplies have been issued, with a view to contracting a new central supplier for each later this year.

Notes to editors

The government procured £66 billion worth of goods and services in 2009 to 2010.

The Efficiency Review by Sir Philip Green, published in October 2010, found that the government had previously not made the most of its scale, buying power or credit rating and supported the intention by government to improve procurement by “mandating centralised procurement for common categories”.

Procurement of common goods and services is being centralised for buying across all central government departments and their agencies. Goods and services to be procured centrally initially include energy, fleet, information and communications technology, office solutions, print and print management, professional services and travel.

The new ‘Government Procurement’ team will be headed by Government Chief Procurement Officer, John Collington. It is charged with ensuring delivery of sustainable cost savings for central government, improving and streamlining current procurement processes, including for SMEs, and improving internal Civil Service procurement capability.

Government Procurement will comprise of the expertise of a streamlined more efficient Buying Solutions - the government buying agency - supported by departmental buying teams where they have particular expertise in buying certain goods and services and can achieve the optimal price deal for the whole of government. Government Procurement services will remain available to the whole of the public sector.

Interim end of year figures show that government is expected to have saved over £1 billion in 2010 to 2011 through spending controls and other efficiency measures in the discretionary areas of spending of consultancy, contingency labour, travel and office supplies.

The Prime Minister and Francis Maude set out a number of new policies to increase the proportion of business government does with SMEs at an SME supplier event in London on 11 February 2011. The policies included more ‘open’ procurement and product surgeries for SMEs.

The Innovation Launch Pad allowed SMEs to submit business proposals to government. Successful proposals are in the process of being selected, before their proponents are offered the chance to receive mentoring from a top entrepreneur to pitch their proposal at a Product Surgery.

HM Revenue and Customs agreed a contract with voluntary and community sector SME, Derwent Living, to provide office services to staff at its Nottingham Castle Meadow office following a successful bid in its reverse auction ‘open’ procurement process.